NOTE: The basic version of this system is operating in Turkey. But it is not properly refined. It works anyway.

Buying a House will be more like paying a rental. The costs will not jump up and down. Because of this, house prices will not be jumping around. The housing sector, which is notoriously disorderly even at the best of times, will therefore become orderly like most other sector of the economy. Prices and costs will rise or fall in an orderly manner.

The inital cost of the monthly payments will be higher than renting, as usual, typically taking around 30% of income for a single buyer. Renting might take 21% of income every year for life.

BUT

Every year this monthly cost will fall compared with a typical rental until it becomes cheaper than renting and ends at something closer to 11% of income at the end of 25 years.

If average incomes are not rising, the payments will fall every year.

If average incomes are rising fast, the payments will rise slowly.

ZERO DEPOST

You start the same waywith 30% of income payments, but the contract will say that you are renting. If you default (fail to pay) you will be deemed to have been renting.

When you have saved a deposit in this way, you will be deemed to be buying and all payments made to date will be credited to your buying account.

If the payments are too high you can switch to renting. Later, if you wish to, you can switch back to buying. All payments made will then count towards buying.

IMPLEMENTATION

The government will start the first scheme. The financial services sector will be trained and allowed to compete. .

One thing no lender will be permitted to do is to lend a whole lot more money when interest rates are low. There is a safe and an affordable amount that people can be lent. When more than that is lent it may look cheap because interest rates are low. BUT that explains why many people today cannot afford to buy a house - they have all become too expensive. The houses are the same - just too pricy.

It makes buying a house almost impossible for many people. We may see house prices crashing down when interest rates rise. Then lenders will charge more and lend less. In future that will not be allowed to happen.

During the adjustment process (getting back to normal) the government will protect existing borrowers for major jumps in their payments and major falls in the value of their homes.

PROTECTING SAVINGS

UNDERSTANDING WEALTH

If the government were to take a percentage of everyone's income and pass it to the retired people, those retired people's incomes might keep pace with National Average Earnings / Incomes, (NAE).

What we need is a way to keep the value of our savings abreast of that same level of National; Average Earnings (NAE).

If a person saves 3 years' National Average (Annual) Earnings / Income (3NAE), then after ten or fifteen years or any other number of years, there should be the same 3 NAE waiting for that saver.

PART TWOSavings, Wealth, and Business Protection

To protect savings, the government will offer Wealth Bonds.

The value of the savings invested in those bonds will keep pace with NAE - National Average Earnings / Incomes. There will be some interest paid on top. Only the interest will get taxed, not the capital growth.

Housing fiannce will also be allowed to raise money in this way, as will businesses.

Businesses will be able to borrow more and plan further ahead than they can now. Whereas a business usually has to start repaying the capital and the interest during the first three years when they have little or no income from their investment in plant and wages, this overcomes that problem. So all of the money they have borrowed might be invested instead of only half of what has been borrowed.

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CURRENT THINKING
Committe for Financial Fairness - CFF
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